Item 25b Staff Report Resolution Adopting Revised Below Market Price housing Program GuildelinesCOUNCIL AGENDA REPORT
DATE: JULY 24, 2003
TO: MAYOR AND TOWN COUNCIL
FROM: DEBRA J. FIGONE, TOWN MANAGER
SUBJECT:
MEETING DATE: 8/4/03
ITEM NO. j S
RESOLUTION ADOPTING REVISED BELOW MARKET PRICE HOUSING
PROGRAM GUIDELINES
RECOMMENDATION:
That the Town Council adopt the attached resolution revising the Town's Below Market Price
Housing Program Guidelines (BMP)
BACKGROUND:
At its meeting of June 16, 2003, the Council gave first reading to Zoning Code Amendment A-03-2 -
amending the Town Code to update the Second Dwelling Unit ordinance. This amendment is in
response to State legislation that requires local governments to use a ministerial process after July
1, 2003 when taking action on a second unit request.
DISCUSSION:
The second unit ordinance approved by the Council, among other things, requires that the property
owner record a deed restriction indicating that if the second unit is for rental purposes, it shall be
rented pursuant to adopted BMP guidelines. Council directed staff to revise the BMP guidelines to
reflect the following:
1. Allow the property owner to determine who they will rent the unit to so long as the rent is
restricted to 20% below Fair Market Rents as determined by the Santa Clara County
Housing Authority. In this instance, no income eligibility requirement will be imposed.
PREPARED BY: Bud N. Lortz
Director of Community Development
Reviewed by: PSG Assistant Town Manager Or Town Attorney Clerk Finance
Community Development Revised: 7/31/03 8:53 am
Reformatted: 5/30/02
PAGE 2
MAYOR AND TOWN COUNCIL
SUBJECT: REVISING BMP GUIDELINES
July 24, 2003
2. If the property owner wishes to use the BMP program to obtain assistance in finding a renter,
then the unit must be rented in compliance with the BMP guidelines in terms of income
eligibility and be restricted to 20% below Fair Market Rents as determined by the Santa Clara
Housing Authority.
The attached resolution revises the BMP guidelines in order to implement the above stated
requirements. In terms of implementation, when a property owner applies for a new Second
Dwelling Unit they will be advised of the BMP requirement. Upon issuance of a Certificate of
Occupancy by the Town, the new Second Dwelling Unit will be added to a list of such units. Each
year the Town will mail a letter to the owner reminding them of the BMP requirement and providing
information regarding the rents that can be charged. The Town may do selective audits of properties
to assure compliance with the BMP requirements.
For reference, the current rent levels for units restricted to 20% below Fair Market Rents as
determined by the Santa Clara County Housing Authority is indicated in the table below. This is
what owners of new BMP units would be able to charge.
# of Bedrooms
1
2
3
4
rent
$1140
$1408
$1931
$2167
Staff will bring a separate item forward for Council's consideration at a later date revising other
sections of the BMP Guidelines to address issues raised by the Council at the September, 2002 Study
Session.
CONCLUSION:
The revisions to the BMP guidelines will implement the requirements adopted in the amended
Second Unit Ordinance.
ENVIRONMENTAL ASSESSMENT:
Is not a project defined under CEQA, and no further action is required.
FISCAL IMPACT:
Amendment of the BMP guidelines will have no direct fiscal impact on the Town.
Attachments:
1. Resolution revising BMP guidelines (revisions to BMP Guidelines indicated in italics)
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RESOLUTION NO.
RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF LOS GATOS
ADOPTING REVISED BELOW MARKET PRICE HOUSING PROGRAM
GUIDELINES
WHEREAS, The Town of Los Gatos Zoning Ordinance Sections
29.10.3000 through 29.10.3040 establishes a Below Market Price (BMP) Housing
program to assist low moderate income Los Gatos residents; and
WHEREAS, the Program requires construction of dwellings that persons
and families of low and moderate income can afford to buy or rent, and assures to
the extend possible that the resale prices of those dwellings and rents, if they are
rented, will be within the means of persons and families of low and moderate
income; and,
WHEREAS, the program helps the Town meet State mandated housing
goals; and,
WHEREAS, this resolution revises the Town of Los Gatos Below Market
Price Guidelines by adding a section that pertains to New Second Dwelling Units.
NOW, THEREFORE, BE IT RESOLVED that the Town Council of the
Town of Los Gatos (1) repeals Resolution 2000-131; and (2) adopts the Revised
Below Market Price Housing Program Guidelines as indicated in Exhibit A.
PASSED AND ADOPTED at a meeting of the Town Council of the
Town of Los Gatos, California, held on the day of , 2003 by
the following vote:
COUNCIL MEMBERS:
AYES:
NAYS:
ABSENT:
ABSTAIN:
SIGNED:
MAYOR OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
ATTEST:
CLERK OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
ATTACHMENT 1
TOWN'S BELOW MARKET PRICE HOUSING PROGRAM GUIDELINES
I. GENERAL PROVISIONS
A. Every multifamily rental dwelling project at the time of building permit, every
residential condominium or planned development residential subdivision at the
time of subdivision, and every community apartment project and every residential
stock cooperative apartment or unit project at the time of subdivision if the
transaction involves subdivision, or at the time of sale, if it does not, shall contain
one or more BMP dwellings according to the rules listed below with the following
exception: Any planned development with an underlying zone of HR, shall only
be required to pay an in -lieu fee as established by this resolution.
1. Projects containing five or more but fewer than twenty market rate units
must provide a number of BMP units equal to 10 percent of the number of
market rate units.
2. Projects which include 20 to 100 market rates units must provide BMP
units as determined by the following formula:
Number of BMP units = .225 (total # of market rate units)-2.5
3. All projects in excess of 100 market rate units must provide a number of
BMP units equal to 20 percent of the market rate units.
4. Whenever the calculations of below market price units result in a fraction
of one-half or more, the number of units to be reserved is increased to the
next whole number.
B. Confidentiality
Client information is confidential and not considered public information except
for statistical information on the BMP units and general demographic information
on the buyers and renters of BMP housing units. Through BMP program
implementation the Town is attempting to provide a supply of low -moderate
income housing. The Town does not wish to set the occupants of such housing
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apart from the general community, attaching a stigma to the occupants.
Furthermore, no public interest is served by disclosure of this information. The
address of the projects containing BMP units may be provided as well as a range
of sales prices.
II. OWNER OCCUPIED UNITS
A. Applicant Eligibility
1. Household Income:
Income limits are set according to household size using the Federal
Department of Housing and Urban Development statistics regarding
median income.
2. Buyer Qualification:
a. A buyer's qualification is determined by the family's ability to
make the monthly payments for the unit. The monthly housing
cost shall include the following factors:
- Unit Price
Current Lending Rates
- Estimated Taxes
Estimated Insurance Costs
Homeowner's Fees
Other expenses as determined necessary by the lender.
b. All persons must qualify for their own mortgage without assistance
from the Town. Qualifications must include the ability to pay
taxes, insurance, closing costs and any homeowner association fees
in addition to the mortgage.
B. Buyer Selection
1. A point system is used to establish applicant rating and ranking.
Applicants will be ranked according to total points and must have at least
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one point to be eligible for consideration. Points are awarded as follows:
Six points:
(a)
(b)
(c)
(d)
(e)
Senior citizens who reside in the Town at the time of application
and have lived in the Town for at least the prior two years. A
senior citizen is defined as any person 62 years of age or older at
time of application or married couples living together when at least
one spouse is 62 years of age or older at time of application.
Senior Citizens who have lived in the Town for at least two years
and have moved out of the Town within the last five years prior to
the time of application.
Handicapped persons who reside in the Town at the time of
application and who have lived in the Town for at least the prior
two years.
Households required to relocate their residence as a result of
Council action or mobile home park closure.
Salaried Town employees as defined in the Town's Personnel
Rules, who have been employed by the Town for a period of no
less than 12 months prior to the time of application.
Five points:
Single heads of household with dependent children who reside in the
Town at the time of application and have lived in the Town for at least the
prior two years.
Four points:
Persons who live in the Town of Los Gatos at time of application and who
have lived in the Town at least the prior two years.
Three points:
Persons who work in the Town of Los Gatos at time of application and
have worked in the Town for at least the prior two years.
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Two points:
a. Households who have lived in the Town for at least 10 years and have
moved out within the last ten years prior to the time of application.
b. Household size is worth two points per person.
One point:
Households who live or work within Santa Clara County at the time of
application.
2. A lottery will be used to rank each qualified applicant in the case of a tie.
3. An applicant has two opportunities to refuse a unit before being removed
from the current applicant pool.
4. Applicants who do not qualify for a particular project shall retain their
eligibility.
5. The highest ranked applicant must obtain pre -approval for a loan within
one week after notification of its eligibility to purchase the unit. The
applicant must submit documentation of loan approval within four weeks
of notification of its eligibility to purchase the unit.
C. Determination of Initial Selling Price
1. The initial sales price of the unit will be determined by consultation
between the Town Manager, or delegate, and the developer within the
price ranges calculated as defined herein. The Manager is authorized to
approve changes in specifications to lower the price of the BMP units
which do not violate any Town code or ordinance requirements, such as
changes in carpeting, lighting fixtures, etc. The initial price will be set by
a BMP price agreement, which must be signed by the Town Manager and
the developer prior to the Planning Commission review of the project.
2. The initial price of a unit may include direct construction costs and may
include a proportionate share of the costs of providing utility services,
required on -site improvement, financing and premium points, loan standby
fees, landscaping and parking, provided that the price shall not exceed an
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amount which will allow a range of qualified buyers (as defined above) to
purchase a unit.
3. The initial price shall not include cost of land, builder's profit, marketing
costs, planning, promotional or advocacy expenses, options preliminary
drawings, preparing working drawings and specifications, off -site
improvements, public agency fees, bonds, insurance, recreational facilities
and engineering and architectural fees related to construction.
4. The range in which the initial selling price shall be set will be determined
through completion of the following calculation on a regular basis:
a. Calculation of the Housing Multiplier
i. Determination of Total Housing Cost
Sales Price - 10 percent down payment = mortgage
+ Annual Debt Service
+ Taxes
+ Homeowners Fees
+ Private Mortgage Insurance (PMI)
= Total Housing Cost
ii. Determination of Minimum Household Income
Assume 30 percent of household income to go towards
housing:
Total Housing Cost/.30 = Minimum household income
iii. Determination of Multiplier
Sales Price/Minimum Household Income= Multiplier
b. Initial Sales Price Ranges
Minimum and maximum sales prices are established by completing
the following formula for a range of family sizes:
Income (80, 100, and 120 percent of median income as defined by
the Federal Department of Housing and Urban Development)
(H.U.D.) x multiplier = sales price.
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D. Deed Restrictions
Council approved Deed Restrictions are recorded with each Below Market Price
dwelling units.
E. Resale of Units
1. If the owner elects to sell his/her unit, the Town must be notified.
2. When a Below Market Price dwelling unit becomes available for resale,
the owner must allow the Town to set the resale price and make the unit
available to other program applicants.
3. The Town determines the resale price in accordance with the deed
restriction recorded on the property.
4. Town markets the unit and ranks applications, to identify the top qualified
applicants.
F. In -Lieu Fees
1. Establishment of Fee:
Projects with five or more but less than ten units may pay a fee in -lieu of
building a BMP unit in order to comply with BMP Program requirements.
Approval of Hillside Planned Developments with five or more residential
building sites shall require the payment of an in -lieu fee. The fee shall be
equal to the amount of six percent of the building permit valuation for the
project. The total building permit valuation is determined by the chief
building official.
2. Fees shall be paid prior to or at time of final occupancy as follows:
a. Multi -Family Owner Occupied Developments. At approximately
40% occupancy of entire development as determined during the
Planning approval process.
b. Multi -Family Renter Occupied Developments. At approximately
75% occupancy of entire development as determined during the
Planning approval process.
c. Hillside Planned Developments. At time of final occupancy for
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each unit.
3. In -lieu fees will be deposited into the Town's Affordable Housing Fund.
Funds will be used, in part, for administration of the program.
Applications/recommendations for use of remaining funds will be
reviewed as received. Possible use of the funds include, but is not limited
to, the following:
landbanking
writing down the cost of owner occupied units to make them
affordable to low/moderate income households
purchasing rental units for renting to eligible tenants.
III. RENTAL UNITS
A. Administration
The program shall be administered by the Town or its designee.
B. Applicant Eligibility
1. Household Income:
In order to be eligible, applicants must have a household income under 80
percent of the County's median income as defined by the Federal
Department of Housing and Urban Development.
2. Ability to Pay Rent
A tenant's ability to pay monthly rent will also be considered in
determining tenant eligibility.
C. Tenant Selection
Applications from tenants selected by property owner or manager will be
forwarded to Town for verification of income eligibility.
D. Management
1. BMP rental units shall be managed in the same manner as other units in
the development.
2. Tenants are eligible to receive conciliation and mediation services
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provided through the Town's Rental Mediation Program except as they
regard rent increases.
E. Unit Rents
Tenants will be limited to persons whose annual income is less than 80 percent of
the County's Median Income as defined by the Federal Department of Housing
and Urban Development. Priority will be given to those households whose
income is less than 50 percent of the median income as defined by H.U.D. Rents
will be restricted to 80% of Fair Market Rents as determined by the Santa Clara
County Housing Authority.
F. Annual Review
If a tenant's income increases so that it falls between 80 and 100 percent of the
County's Median income, then the rent may be increased in accordance with the
Town's Rental Dispute Ordinance; and the unit shall still be considered a BMP
Rental Unit. However, if a tenant's income exceeds 100 percent of the median,
the rent may be increased to the average rent of similar units in the complex; in
this latter case, the unit will no longer be a BMP unit and the next available unit
must be rented to an eligible household so that the number of subsidized units
remains the same.
IV. RENTAL UNITS - NEW SECOND DWELLING UNITS
A. Administration
The program shall be administered by the Town of Los Gatos Community Services
Department, or its designee.
B. Rental of unit directly by property owner
The property owner of a New Second Dwelling Unit, as defined in Section 29.10.310 of
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the Town Code, may choose to advertise or otherwise select a tenant for a unit without
seeking assistance from the Town BMP program. In this case, the tenant does not have
to be income qualified (income levels are not considered), however, rent levels of the unit
are restricted to at least 20% under Fair Market Rents as determined by the Santa Clara
County Housing Authority.
C. Rental of unit with assistance of BMP program
The property owner of a New Second Dwelling Unit may choose to use the BMP program
to obtain assistance in finding a tenant. In this case, the tenant must be in Compliance
with the BMP guidelines in terms of income eligibility. Tenants will be limited to persons
whose annual income is at least 20% under the County's Median Income as defined by
the Federal Department of Housing and Urban Development. The rent levels of the unit
are restricted to at least 20% under Fair Market Rents as determined by the Santa Clara
County Housing Authority.
D. Monitoring and Review
Upon request from the Town, the property owner shall provide all information requested
regarding rental level of the New Second Dwelling Unit.
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